CHAPTER 3 ANALYZING THE EXTERNAL STRATEGIC ENVIRONMENT Bess Luker- Mamie Duprie- Alicia Estrada-...
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CHAPTER 3ANALYZING THE EXTERNAL STRATEGIC ENVIRONMENT
Bess Luker- Mamie Duprie- Alicia Estrada- Taylor Watts- Ryan Dupriest
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What will be covered
Globalization Global Trends Risk and Uncertainty Scenario Analysis Business and Society
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Globalization
World’s major economics and intensified competition
70-85 % of U.S. Economy Business Growth Flow of Information
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Understanding Globalization
Focus on the trade and regard the free flow of capital
Political Globalization Economic Globalization Technological Globalization Psychological Globalization
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Regionalism: A Stepping Stone on the path Toward a global Economy
Globalization a work in progress Triad EU NAFTA ASEAN EUROMED APEC Mercosur
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New Powerhouses: India and China India: Investment is growing, foreign capital and
technology are coming in, Western-style competition is taking hold, and state intervention is diminishing.
China: has combined inexpensive labor with technology to create a major, global competitive advantage.
A key challenge for Western companies doing business in China is that the government still controls many aspects of the business environment.
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Global Tectonics and Their Strategic Implications
The maturity of many Western markets has forced firms to expand beyond the confines of the developed world into areas with greater potential that carry a level of risk far greater than that to which they are accustomed.]
Greater participation means more growth.
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Global Tectonics
Describes the process by which developing trends in technology, nature, and society slowly revolutionize the business environment, much like Earth’s tectonic plates shift the ground beneath our feet.
Environmental tectonics Technological tectonics Societal tectonics
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12 Global Trends
Present the most significant challenges for companies in the next 30 years.
1. Population Trends2. Urbanization3. The spread of infectious Diseases4. Resource management5. Environmental degradation6. Economic integration7. Knowledge dissemination8. Information technology9. Biotechnology10. Nanotechnology11. Conflict12. Governance
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1. Population Trends
Population is rising Highest in areas not capable Aging of population Women in the workforce
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2. Urbanization
Migration from rural to urban areas( less than half of population lives in cities)
Mega cities will become common
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3. The Spread of Infectious disease Greater levels of migration = greater
likelihood of epidemics. Impact on economic growth
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4. Resource management
Access to fresh water is a key concern. Possibility of future conflicts over water
resources. Energy availability is a ongoing concern
Wind Farms
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5. Environmental degradation Effects on ecosystems
Droughts Water pollution Deforestation Erosion Kyoto Treaty- reduce greenhouse gas and
gas emissions world wide.
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6. Economic integration
Cross-boarder economic activity Airbus Consortium
Britain Germany Spain France
Multinational Corporations (MNC’s) Some industries are more regulated than
others Steal Industry Telecommunications
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7. Knowledge Dissemination
Emergence of a global economy Internet economy Smart products
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8. Information Technology
Internet Ex. Yamaha-Motor’s online dealer
management system Intranet Quality of people’s lives
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9. Biotechnology
Greatest potential in three areas Medicine Agriculture Environment
Long run
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10. Nanotechnology
One atom at a time Molecular manufacturing
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11. Conflict
Berlin Wall Terrorism ex. 9/11 Companies must develop security
standards
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12. Governance
Two interrelated sets of laws Rule of law Ex. 2009 Lead law banning sale of motorcycles
for children Market defines the second set of laws
Dimensions: Management structures Business culture Cross-border investment Global investors
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A Global Knowledge Economy- Strategic Implications
1. Laws of abundance2. Location is diminished3. National laws, barriers, and taxes4. Knowledge-enhanced products and or
services1. ex. Yamaha’s EFI and ATV power steering
5. Higher Inherent value6. Human capital
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Risk and Uncertainty
Predictability Certainty Risk Uncertainty
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Scenario Analysis
One of the most widely used techniques A disciplined method Two categories
Things we believe we know something about Elements we consider uncertain or unknowable
The objective The scenario-building process
Decide Identify Construct Generate
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The Global Scenario Group
Three fundamentally different social visions of the future Conventional worlds Barbarization Great transitions
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Conventional Worlds
Envision the global system evolving without major surprises
World economy grows rapidly and developing countries
Scenario 1: incorporate mid-range population & development projects typical technology change assumption
Scenario 2: Adds strong, comprehensive and coordinated government action
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Barbarization
Envision the grim possibility that the social, economic, and moral underpinning of civilization deteriorate
Scenario 3: Crises combine and spin out of control
Scenario 4: features and authoritarian response to threat of breakdown
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Great Transitions
Explore visionary solutions to sustainability challenge
Scenario 5: Incorporates the green vision Scenario 6: Shares some of the goals of
scenario 5 but seeks to change the character
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Compact Between Business and Society
“Business as usual” might no longer be and option and traditional strategies change
Size means scrutiny- the larger the company is the more exemplary performance in ethical behavior, employee practices etc
Cutting costs raises compliance risk- the more a company cuts cost the more potential for noncompliant ethical practice
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Compact Between Business and Social Continue
Strategy must involve society- forward thinking companies have to think about social and environmental problems
Reducing risks means building trust- classic risk managements also expands events arising in society
Satisfying shareholders means satisfying stakeholders- Company pays attention to business- society relationships
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Compact Between Business and Social Continue
Global growth requires global gains- global perspective recognizes strong communities
Productivity requires sustainability- environmental management, safety, etc.
Differentiation relies on reputation- United States 50 million people $225 billion large influence
Good governance needs good representation-corporate scandals generating strict controls